Central Bank to the Rescue

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Godwin Emefiele
Emefiele

The Central Bank of Nigeria has decided to intervene to pay off about N25 billion owed to gas producers by power generating companies to ensure steady power supply in the country

By Anayo Ezugwu  |  Aug. 18, 2014 @ 01:00 GMT

THE federal government is to commit $1 billion to improve gas infrastructure in the country. James Olotu, managing director, Niger Delta Power Holding Company, NDPHC, said on Monday, August 4, that the decision was taken to tackle inadequate gas, which has greatly affected power supply in the country.

Olotu disclosed this after a meeting of stakeholders presided over by Vice-President Namadi Sambo, in Abuja. According to him, “The meeting addressed few critical issues pertaining to the issue of stranded power in the sector. The President and his team have worked assiduously in the area of strategies to improve power supply to the nation by building massive infrastructure in generation, transmission and distribution.

“Unfortunately, there is a little shortfall coming from the gas sector in spite of concerted efforts to address the situation. There is an obvious shortfall in gas supply to the power plants that have been built and are being privatised. And this shortage has created some problems and concerns in the industry regarding how the financiers of these plants feel about the situation,” he said.

Olotu said the board of the NDPHC met on Friday, August 1, to look at additional strategies through which the government could move the sector forward. “One of such strategies is to commit some of the expected funds from the sale of power holding companies towards partnering with the private sector again in developing some hollow walls as well as identify certain portions where there have been proven gas availability. This programme promises to unlock gas from these locations within a short time and then complement efforts currently being done by the petroleum ministry to ensure that we close the gap between gas requirement and gas supply.

“The sum of $1bn out of the funds of the NDPHC is being put on the ground to support this initiative and this will involve a lot of private sector investors who will be willing to partner with us and get this gas supply enhanced. The Ministry of Petroleum Resources is agreeable to this and is supporting the entire programme. Similarly, the Ministries of Power and Finance are also in the picture. And so, we hope that gas supply will become a thing of the past very soon; then, maybe we can begin to have more megawatts.”

Godknows Igali, permanent secretary in the ministry of power, said the meeting was a follow-up to the one jointly held at the weekend between the ministers of power and petroleum resources, as well as the governor of the Central Bank of Nigeria, CBN and the chairman of the Nigerian Electricity Regulatory Commission, NERC, where issues pertaining to gas supply to the power plants were discussed.

James Olotu
James Olotu

Meanwhile, Godwin Emefiele, CBN governor, has promised that the bank would pay off about N25 billion owed by power generating companies to gas producers in the country in order to remove the air of uncertainty in the sector and ensure steady gas supply to keep the economy running. He said the apex bank had always looked for ways to support the power sector, which he described as very essential to unlocking the economic potentials of the country, According to Emefiele, the payment of the outstanding debts would serve as a guarantee to the suppliers and give the ailing sector the needed boost.

Speaking at a press briefing organised in collaboration with the ministry of petroleum resources, ministry of power, the Nigerian National Petroleum Corporation, NNPC, and the NERC, in Abuja, Emefiele described the action of the CBN as ‘sowing some seeds and providing a form of intervention at concessionary prices to support the endeavour to provide power to Nigerians and help in growing the economy.’

He said in order to give confidence to stakeholders in the gas sector regarding the willingness of the power sector to settle its outstanding debts for gas, the bank would support initiatives to clear up the most recent gas-related debts of the power sector. “Specifically, the CBN is looking at banking sector-led measures to pay off N25bn debts owed to gas suppliers. This will be subject to reconciliation efforts and adequate provision for this support in a revised MYTO that ensures repayment within five years. The Central bank will also play a key role in financial arrangements that guarantee payment for gas supply by the power sector,” he said.

Emefelie noted that the Bankers’ Committee, BC, had called for more actions towards the sector at its recent meetings, and that led to the CBN Governor being asked to continue engagement with the ministries of petroleum resources and power. “Our interactions with stakeholders revealed that there are some outstanding legacy debts of about N25 billion, and we thought that as a financial catalyst in this process, we should give support by ensuring that the existing gas suppliers are given confidence by paying off these outstanding debts.”

According to him, the CBN as well as the deposit money banks “will seek ways to set up an SPV through which this debt of N25 billion will be paid to gas suppliers, and thereby give them the confidence to continue to produce gas which is badly needed to power the generating plants.

“As I made clear in my inaugural speech, I felt that power is very essential to unlock the potentials of the Nigerian economy, and to do so, we felt that it is important for us to begin to learn about the issues that are militating against adequate supply of power for the economy to thrive. This is why we are engaging in this collaboration with the two ministries of government directly responsible, as well as with the NERC and the NNPC, to ascertain areas that we can come in to ease the bottlenecks and give the sector a shot in the arm.

“We have found out that investors that would have liked to come into the sector have been queasy about the gas pricing modalities; many of them believe that the price of gas is not competitive enough as per what obtains elsewhere in the world. This is the reason we have decided to intervene in such a manner. We are hoping that with the adjustment in the gas pricing, it will make the sector more competitive for existing and potential producers, and of course, the banks will be more than ready to come in and act as financial catalysts, which is part of their obligation to growing the national economy,” he said.

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